Australia’s largest lithium mine flags output cut on weak China demand

afr.com:

Greenbushes, Australia’s largest hard rock lithium mine, may be forced to reduce productionas prices for the key battery metal collapse on lower Chinese electric vehicle sales.

Greenbushes is 51 per cent owned by a partnership between ASX-listed IGO and Tianqi, a Chinese lithium giant. New York-listed Albemarle owns the remaining share. The outlook was disclosed by IGO to investors on Monday.

Shares in the nickel, copper and lithium group fell more than 9 per cent, or 95¢, and were trading at $9.70 by Monday afternoon.

The Greenbushes mine is owned jointly by IGO, China’s Tianqi and Albemarle. Getty

“It may be necessary to reduce production at Greenbushes during the second half of [this financial year],” IGO said in a quarterly market filing.

Greenbushes is widely regarded as Australia’s best lithium asset, with the highest grade and largest spodumene deposit in the world. While the mine has one of the lowest costs of production, plummeting lithium prices still dent its commercial case. Prices for the battery commodity have collapsed since January, prompting Rio Tinto to hint this month that the three-year boom in lithium prices could be coming to an end.

Chinese customers have reduced their appetite for electric vehicles in the past year, so manufacturers and refineries have not needed to restock lithium reserves.

In response to the price drop, IGO said it had decided with Tianqi to stockpile part of the lithium rich spodumene it is entitled to under the mine joint agreement. It warned investors to expect sales to be 25 per cent lower than production forecasts.

“The unallocated concentrate volumes will be stockpiled at Greenbushes and be available for future sales,” the company said. The decision to stockpile was driven